Publicis Groupe and Dentsu End Decadelong Alliance

French Holding Company Buys Back 18 Million of Its Own Shares

Publicis Groupe has completed a share buyback to end its partnership with Japanese ad giant Dentsu, with which it has had both a capital and strategic alliance since 2002.

Maurice Levy Credit: Bloomberg

The Paris-based holding company bought a block of 18 million of its own shares from Dentsu for $848.5 million. Now that Dentsu is enjoying a windfall, it could use those funds to bolster its presence in the West; the company has focused on growing its footprint in the U.S. -- via the acqusitions of McGarryBowen, 360i and Firstborn -- as well as in Europe and South America.

During Publicis Groupe 's earnings presentation last week, it was made clear that cash was being kept aside to purchase the shares, and Mr. Levy said he would cancel the shares immediately.

According to a statement issued from Dentsu's Tokyo headquarters, this marks the end of three agreements: a shareholders' pact with Publicis; a strategic alliance with Publicis; and a shareholders' agreement with Elisabeth Badinter, a member of the founding family and main shareholder of Publicis. "As a result of this termination, Dentsu and Ms. Badinter will no longer act in concert," the statement said.

Ms. Badinter holds 10.99% of the shares and 19.92% of the voting rights of Publicis Groupe .

The proceedings at both companies took place this week. At a meeting held Feb. 14, the supervisory board of Publicis discussed a proposal to proceed with the buyback. It concluded that the acquisition of 18 million shares and immediate cancellation of 10.7 million shares (what's allowed under French law) was in the interest of the group, so the board unanimously approved the transaction. Dentsu then passed a resolution at its board meeting Feb. 16 in Tokyo to terminate its agreements with Publicis.

As a result, Tadashi Ishii, president-CEO of Dentsu, and Tatsuyoshi Takashima, Dentsu's chairman, have resigned from Publicis' supervisory board. To the degree that any collaboration will continue in the future, Dentsu still holds 2% of shares in Publicis following the share cancellation, and the two ventures between the companies, Beacon Communications and Dentsu Razorfish, will stay intact.

"Today marks the close of a chapter in our 10-year partnership with Publicis," Mr. Ishii said in a statement. "I would like to express my sincere gratitude to Madame Elisabeth Badinter, chair of the supervisory board of Publicis Groupe ; Mr. Maurice Levy, chairman of the management board and CEO of Publicis Groupe ; and all the members of the Publicis Groupe for their support during our amicable partnership over the past 10 years. I look forward to continuing our friendly relationship with Publicis as we work toward furthering the mutual growth of our clients and developing our businesses."

"The partnership with Dentsu over the past 10 years has been amicable and exemplary," said Mr. Levy in a statement. "Dentsu's stake in the share capital of Publicis has furthered the development of the Groupe. I wish to express my gratitude for the elegance and professionalism with which this partnership has been carried out, and to all the Dentsu executives who have taken part."